Talent Management Software Is Bundling Up

Bulk buying is in these days when it comes to talent management software. Just ask Christopher Faust, executive vice president of global strategy at HR application vendor Softscape.

In 2003, about 50 percent of Soft­scape’s customers bought a single talent management product, such as a performance management or recruiting application. This year, Faust says, it’s a different picture: Roughly 90 percent of Softscape’s sales involve multiple products, which are typically linked. Wayland, Massachusetts-based Soft­scape expects to record sales of more than $40 million this year. "Instead of just buying performance management, they might also include some component of learning management or even succession planning," Faust says.

He isn’t alone in seeing talent management applications snapped up in pairs or more. It’s a broader industry trend, says Jason Corsello, analyst at market research firm Yankee Group. The main factor behind the buying shift, he says, is that organizations recognize they can make better use of their workforce data when they integrate applications such as performance and compensation management. "The suite approach is finally starting to take off," Corsello says. "The true value is starting to resonate."

Troy Kanter, president of the human capital management division at HR software and services firm Kenexa, offers a case in point. By connecting applications, organizations can assemble profiles of successful workers from performance management software and then use those profiles in a recruiting application to guide their hiring, he says. Kenexa, which sells products ranging from pre-hire testing and applicant tracking software to performance management, succession planning and HR analytic tools, also is seeing most customers buy more than one application at a time. "Four years ago it was the exception," Kanter says. "Now it’s the rule."

Talent management software refers to applications for tasks such as recruiting, performance management, learning management, compensation management and succession planning. These areas are considered strategic as firms recognize the value of employee contributions and try to make the most of their human capital.

Just how vital talent management is to organizations was revealed in a joint study earlier this year by consulting firm Knowledge Infusion and the International Association for Human Resource Information Management, a professional society. In the survey, which polled members of the association, nearly 78 percent of respondents said they see talent management increasing in importance during the next three years.

On the other hand, the study indicated companies have a ways to go in knitting together their HR software. More than 40 percent of organizations have little or no integration from either a process or technology standpoint, the survey found.

The suite approach to buying might seem to favor the biggest players in the field—SAP and Oracle. These titans have long pitched a comprehensive and connected set of HR applications, including talent management products, as the best way to go.

Even so, Oracle and SAP tend to be a step or two behind the smaller vendors that focus on a few talent management products, says Jason Averbook, chief executive of Knowledge Infusion. That’s because the giants have hundreds of products, including non-HR software products, to work on, he says. And customers in many cases want more functionality than Oracle and SAP can deliver, Averbook says. The big vendors "always catch up, but they’re never going to be bleeding edge," he says.

SAP and Oracle, for their part, argue that stitching together applications from multiple vendors is expensive. "While niche players may offer different features and functionality, none can provide the true business benefit realized from an integrated architecture," Oracle said in a statement.